Marchment clients must wait longer for money

This article was published more than 23 years ago. Some information may no longer be current.

Clients of defunct penny-stock dealer Marchment & Mackay Ltd., whose assets have been in limbo for more than 10 months, may have to wait several more to get the money out of their investment accounts.

About 17,000 Marchment account holders are still waiting for a complex legal and administrative process to be completed so they can get full access to their cash and securities.

Those accounts were transferred to Toronto brokerage Rampart Securities Inc. in March, but investors are currently allowed only to trade shares and juggle their holdings -- they can't get the money out.

Now, sources close to the situation say it could be another two or three months before the accounts are completely freed up.

The slowdown has been caused by uncertainty over who will pay the costs of winding down Marchment, which declared bankruptcy in late July last year, just before the Ontario Securities Commission cancelled its registration. OSC commissioners ruled the company was effectively a "boiler room" that sold inappropriate investments to clients using high-pressure sales tactics.

In late March an Ontario judge ruled that the bankruptcy costs can be picked up by Ontario's Contingency Trust Fund, an insurance pool funded by mutual fund and investment dealers.

The court had to get involved, because the fund's rules for reimbursing brokerage customers were not clear. There was concern that the former Marchment clients might have been legally on the hook for some of bankruptcy costs.

The contingency fund agreed to pay the costs, however, and the court endorsed the move.

But even with that hurdle crossed, there have been a number of related administrative issues that have delayed the release of the funds.

For example, lawyers for the contingency fund are set to meet next week with the bankruptcy trustee, Schwartz Levitsky Feldman Inc. of Toronto, to determine just how much the bankruptcy proceedings will cost.

Once that issue is settled, a judge still has to give final approval to the winding-down process.

Meanwhile, investors' accounts stay in limbo. Some of the former Marchment clients say they have been kept in the dark about the status of their accounts. One investor, who has about $15,000 in his former Marchment account, said there has been no new information available since the accounts were shifted to Rampart in March.

"I've never been updated" on what's going on, he said. "I just want to sell everything or start the wheels in motion for a transfer. It's frustrating."

The situation at Marchment contrasts sharply with the closure of another Toronto penny-stock dealer, A.C. MacPherson & Co.

The OSC went after MacPherson for buying stock in tiny companies at discount prices and reselling it to clients at a huge markup. MacPherson agreed to shut its doors in April, but the closure was done in an orderly manner without bankruptcy proceedings. Clients were able to shift their holdings to any other broker, and keep complete control of their assets.

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